Scout Programs

A scout program lets someone outside a venture firm source and back early-stage companies on the firm’s behalf, in exchange for some share of the upside. Paige Finn Doherty’s Oct 28, 2020 thread frames the logic: capital historically belonged to the people with deal flow, but the internet has widened the gap between capital and access to founders. Scouts have founder networks but no capital; firms get reach into networks of aspiring investors, exposure to competitive deals and an efficient way to scan seed-stage flow. Scouts may be paid in cash or carried interest and get a hands-on way to learn investing.

How programs differ. The thread names five variables: community, capital (how much a scout can deploy), credibility of the fund, scout conditions (compensation and exclusivity), and curriculum. Which to prioritize depends on the scout: a newcomer might want curriculum and community, an informed investor planning a fund might want thesis fit and credibility, and a busy experienced investor might want the biggest cut. Many programs are not open to the public, so the thread advises building relationships with people at firms and introducing them to founders, though some have open applications.

Examples and precedents saved in the wiki.

• Sequoia is described in the thread as a leader, now on its fifth batch of scouts, having begun about 11 years earlier by letting portfolio founders back founder friends.
• Kevin Gee calls Teledyne “one of the OGs to use scouts,” and points to Brent Beshore’s Permanent Equity as the closest modern analog.
• A 2021 review of the Uber alumni syndicate (Moving Capital) reports $40M invested across 77 deals, 35 of them sourced by scouts.
• Tyler Tringas (Earnest Capital) describes a “super-charged scout program” that requires deep analysis from scouts, offers substantial upside and serves as an on-ramp to investing.
• Paige Finn Doherty also asked which VCs run the best scout or fellowship programs, separating large community programs from closer apprenticeships with one to three scouts.

A skeptical view. On 20VC: Why 75% of Active Investors Will Disappear, one speaker lists Sequoia’s scout programs among its innovations in discovery, but predicts the value and quality of scout networks will dilute over time because the community is an afterthought, planted in hope of deal flow rather than built to be good for its own sake.

See also Breaking into VC and Super Angels.

Where this appears

• Podcasts: 20VC: Why 75% of Active Investors Will Disappear
• People: Paige Finn Doherty
• Tweets: Hey Aspiring Vcs 👋 We’re Going… (tweet), Teledyne was one of the… (tweet), As I Have Done Before… (tweet), Early Stage Investing - VC… (tweet), Which VCs Run the Best… (tweet)